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Rents, Lake Geneva region increases compared to Switzerland, 2007

(Also see part 1:Geneva, Vaud apartment hunters struggle to find a place to call home)

Ed. note: click on images to enlarge

True or false

Rents have climbed continually in the Lake Geneva region

Mostly true, with rent increases outstripping those in the rest of Switzerland since 2002, when the rental market momentarily slipped.

True or false

The sale price of homes has climbed continually in the Lake Geneva region in the past 20 years

Overall, yes, up 179 percent from 1977-2008, but up 30 percent in 30 years in real terms: with cost of living increases taken into account. The increase has not been steady, however, with a big dip in the early 1990s, Swiss-wide, when easier mortgages led to a sudden bubble in prices, which then burst. Stricter rules were put in place: a home-owner’s debt cannot exceed 80 percent of the value of the property.

By comparison, US borrowers have often been able to borrow up to 120 percent of the sales value of a home. In Switzerland, bank mortgages must take into account the property’s intrinsic value, based on construction costs and the age of the property, rather than the sales value set by the market, which can be the case in the US. Since the new rules, housing prices in the country have climbed, but in line with Switzerland’s growth in GDP (gross domestic product).

Lake Geneva region sale prices, apartments

The Lake Geneva region has been the exception, with prices climbing faster than the region’s GDP due to the attractiveness of the region and too little new construction, according to Acanthe, which refers to three periods: 1978-90, when home prices rose faster than rents; 1990-2000, a market correction period when home prices did not rise in line with rents; 2000-2008, when home prices again rose faster. For Acanthe, the market has probably topped out in the region, and real estate prices can be expected to remain relatively stable.

As always, Geneva is a special case and sale prices have increased 60 percent in the past five years because of market pressure.

True or false

Switzerland is due for its own sub-prime market crash, with housing prices collapsing the way they have in the US and the UK

False, thanks to a combination of several factors: 1) The market is very tight, with far more demand than supply, 2) there is little speculation because foreigners abroad can’t buy easily and the internal market moves too slowly to be quickly profitable for would-be Swiss speculators, 3) banks have remained conservative in their lending despite high housing prices. In addition, a key factor is that housing prices, which have risen slightly less than GDP in Switzerland, reflect the growth of the Swiss economy rather than an inflationary bubble, the opposite of the situation in the US in recent years.

True or false

The international population in the Lake Geneva region is to blame for driving up rents and house prices

Partly true: “blame” would be putting it too strongly. The larger international population, many of whom are students or who work for local Swiss salaries, with no perks such as home leave, housing allowances or tax-free income, suffer price squeezes in the same way the Swiss do. The smaller group of expats (see related article from l’Hebdo) and their companies put pressure on the system, as do well-paid senior level international organization workers who pay no taxes.

When a company moves in, with dozens to hundreds of employees, it needs a large amount of housing at the top end, quickly. It can cost close to a million Swiss francs to settle a family of four for three to four years, and temporary housing or moving the family twice can boost that cost, so companies tend to be willing to pay a premium for good housing the employee can get right away. International employees with generous salaries compared to the local market, who pay no taxes and often have good housing allowances, are widely viewed as driving up rents in Geneva.

A 2008 study, “Do foreigners pay higher rents for the same quality of housing in Geneva and Zurich?”, published by the Geneva School of Business Administration and based on a doctoral thesis by Caroline Shaerer at EPFL, backs this, as does the 2008 Observatoire published by Acanthe.

Lake Geneva area rent differences

True or false

Housing is cheaper and easier to find in Vaud and Lausanne than Geneva

Geneva has the tightest housing market in Switzerland in terms of vacancies, but relocation agencies point out that what matters, if you’re looking, is the rate of turnover rather than the rate of vacancy, and Geneva housing turns over more frequently than it does in Vaud and even Lausanne – international schools traditionally talk about a 25 percent annual rate of turnover of their students, reflecting the rate at which expats tend to come and go.

Region-wide prices hide the reality of signficant differences in rent between cities, towns and particularly between the lakefront area and what the Swiss refer to as the back country. Lausanne has escaped, to some extent, the Geneva price jumps, and improved its situation slightly by building 700 new apartments in 2006: the vacancy rate was boosted from 0.2 percent to 0.3 percent.

True or false

When someone moves out chances are good the rent will be increased

Unfortunately for tenants in Geneva, which records this information (other areas do not), the rent goes up more than 70 percent of the time – and it goes up a terrific 17.5 percent, cantonal statistics show. According to Acanthe, there are two reasons for this: tenants stay in the same apartment for years, and renovations, which permit landlords to increase rents, are undertaken at that point.

It’s worth noting that the cost of an apartments in Geneva is more closely linked to its age than its location and that apartments built before  1947 are often more expensive than those built 1947-1960, because of regulations covering renovations and how landlords can charge.

True or false

The fewer rooms in an apartment the lower the rent per square metre

Partly true. The highest cost per square metre tends to be for the smallest apartments, logically enough because adding on an extra bedroom is relatively inexpensive. It drops rapidly for three-room apartments, climbs for four- and five-room apartments, then falls again for six-plus rooms, on a per square metre basis.

True or false

The most expensive villa sold in canton Geneva last year cost more than CHF50 million

Of course not! The price tag was only CHF45.6 for the Cologny villa. The four other highest home sale prices in the canton were CHF30, 30, 25 and 21 million. One is in Prégny-Chambésy, another in Vandoeuvres and the others in Cologny.

Editor’s note: the Observatoire 2008, (The Lake Geneva region and its housing market), May 2008, published in French by Acanthe served as the source for much of this information. Graphs and charts are the copyright of Acanthe, 2008, and reproduced with permission.